This article is based on reporting originally published by CRN and statements made by DXC Technology CEO Mike Lawrie during the company’s Q1 FY2020 earnings call, circa August 2019.
DXC Expands Its Multi-Cloud Portfolio With Google Cloud Partnership
DXC Technology, the Tysons, Virginia-based systems integrator, announced a strategic partnership with Google Cloud in August 2019, giving the company a presence across all major cloud hyperscalers. The move followed a partnership with Microsoft Azure announced in July 2019 and a previously established DXC-AWS Integrated Practice that delivers IT migration services.
Speaking during the company’s earnings call, DXC CEO Mike Lawrie framed the Google Cloud agreement as a means to modernize enterprise IT and expand the company’s artificial intelligence capabilities:
“This partnership will allow us to modernize mission-critical IT for enterprise clients and integrate digital solutions capitalizing on the Google Cloud Platform. Under our partnership agreement, DXC will also be launching centers of excellence for Google Cloud Platform and Google Cloud Artificial Intelligence to provide clients with secure, agile and scalable cloud-based digital platforms that leverage our advanced analytics capability.”
— Mike Lawrie, CEO, DXC Technology
Completing the Hyperscaler Stack
With the Google Cloud addition, Lawrie told investors that DXC could now offer customers access to all leading cloud platforms. The company’s cloud portfolio at the time encompassed:
- Amazon Web Services (AWS) — via the DXC-AWS Integrated Practice focused on IT migration
- Microsoft Azure — partnership announced in July 2019
- Google Cloud Platform (GCP) — new strategic partnership including centers of excellence for GCP and Google Cloud AI
- Oracle and VMware — ongoing cloud practices rounding out the multi-cloud offering
“The Microsoft Azure and Google Cloud practice complement our ongoing cloud work with AWS, Oracle, and VMware to give our clients access to the largest cloud providers in the world,” Lawrie said.
Strong Cloud Momentum — But Uneven Across Industries
Lawrie reported that DXC’s cloud infrastructure solutions business grew 36 percent year-over-year, driven by demand for cloud migrations and multi-cloud architectures. He noted that the pace of cloud adoption is not uniform across sectors:
- Consumer packaged goods companies were migrating to the cloud more rapidly.
- Financial services and insurance companies were moving more cautiously.
- Despite variation, DXC reported accelerating cloud adoption among its top 200–300 enterprise clients.
The company also cited a deal win with a major European aerospace and defense firm, for which DXC was providing cloud migration, security, and analytics services — a deal Lawrie highlighted as an example of leveraging knowledge of legacy infrastructure to modernize client architectures.
DXC’s enterprise cloud applications and consulting business also showed momentum, growing 17 percent year-over-year, with strength in the Americas region attributed to its Microsoft, SAP, and ServiceNow practices.
The Revenue Transition Problem: Why Cloud Growth Hurts Short-Term Margins
Despite the strategic wins, Lawrie acknowledged a structural challenge familiar to any large systems integrator navigating a cloud transition: as customers lift and shift workloads to cloud providers, demand for traditional on-premises hardware and services — which historically carried strong margins — declines faster than new digital revenue can fill the gap.
“It’s really tough when these volumes go away. You don’t need as many servers, you don’t need as much storage, you don’t need as much of this and that. That stuff doesn’t move out in 60 days. It just doesn’t work that way. It takes time to do that. But yes, as those costs come out, then that gives you a great opportunity for margin expansion on the new digital business.”
— Mike Lawrie, CEO, DXC Technology
This is a well-recognized transition dynamic in enterprise IT services: legacy infrastructure contracts generate predictable, high-margin revenue that cloud migrations effectively retire. The new cloud-brokerage and managed services revenue that replaces it typically takes time to scale to equivalent margin levels, creating a trough in financial performance during the transition period.
Financial Results: A Difficult Quarter
DXC’s Q1 FY2020 results (quarter ending June 30, 2019) reflected this pressure:
- Revenue: $4.89 billion, down approximately 7.39 percent year-over-year
- Net income: $168 million
- Diluted EPS: $0.61
- Share price: Fell to an all-time low, dropping $16.72 (approximately 32.37%) in Friday morning trading following the earnings release
Lawrie sought to reassure investors that the company had recovery plans in place and that the shortfall reflected a trend that diverged from what leadership had observed at the end of the prior fiscal year — and that signaling it transparently was the right approach regardless of the market reaction.
Key Takeaways for DevOps and Enterprise Cloud Teams
The DXC-Google Cloud announcement illustrates several broader trends relevant to enterprise IT strategy in 2019 and beyond:
- Multi-cloud is now table stakes for large SIs. Enterprise clients increasingly expect their systems integrators to be fluent across AWS, Azure, and GCP rather than locked into a single hyperscaler.
- Centers of excellence accelerate adoption. Dedicated practice areas for specific platforms — particularly for emerging capabilities like cloud-native AI — allow SIs to build repeatable methodologies and certifiable expertise that reduce delivery risk for clients.
- The lift-and-shift phase compresses margins. Infrastructure migrations eliminate hardware-driven revenue quickly; organizations should plan for a transition period before cloud-optimized workloads generate equivalent returns.
- Industry vertical matters. Cloud migration velocity differs significantly by sector; DevOps teams operating in regulated industries such as financial services or insurance should expect longer timelines and additional compliance overhead.